Navigating cyber risk in the manufacturing sector


There’s a prevalent misconception among manufacturers - that cyber threats are all about data security and nothing else. Caroline Thompson, Chief Underwriting Officer, Cowbell discusses why this mindset needs to shift, delving into a broader understanding of cyber risks in manufacturing operations and what to do to protect your business from them.
Today’s market landscape is volatile to say the least. From the after-effects of Brexit and Covid, to the war in Ukraine, energy crisis and rising inflation, the events of the past few years have had a ripple effect across the UK’s industries - with manufacturing hit particularly hard.

As well as contending with major disruptions to supply chains, increased materials costs and high interest rates - affecting manufacturers’ ability to invest in new technology - another threat to the industry is growing stronger by the day: cyber attacks.

The biggest threats to manufacturing businesses

As technology’s been advancing at an unprecedented rate of late, one of the most notable shifts we’ve seen is a steep rise in ransomware attacks, which as well as becoming more prevalent, have also become more sophisticated as a result of advancements in AI.
In fact, in 2023, manufacturing saw the highest share of cyberattacks among the leading industries worldwide, with manufacturing companies encountering nearly a quarter of the total cyberattacks during the examined year.
These attacks are often accompanied by a double extortion tactic, whereby threat actors not only encrypt sensitive data, but also threaten to release it publicly unless a ransom is paid. Unfortunately, the manufacturing industry has experienced rather a lot of extortion events in the past and this method in particular adds a layer of urgency and complexity to the incident.
Alongside ransomware attacks booming, we’ve also seen the attack surface for cyber threats expanding, which is thanks to the growing connectivity of operational technology (OT) systems within manufacturing facilities. Despite often being connected to the internet, OT is typically overlooked from an upgrading and patching point of view, mainly because compared to IT, it can be more difficult and expensive to do so. However, ransomware and malicious intrusion into IT and connected OT is the biggest problem we see in manufacturing businesses. Among all manner of issues this can cause - from business income lost, to inability to pay employees or meet customers’ deadlines, or customers’ IP getting into the wrong hands and breach of contract lawsuits - supply chain failure is also a very real possibility, whether it’s raw goods coming in or the distribution of goods once manufactured.
Despite these evolving risks, many manufacturers are failing to recognise their cyber exposure adequately. While it’s true that they may not traditionally deal with sensitive data, their reliance on interconnected systems and technology makes them attractive targets for cybercriminals.
The answer, however, isn’t to avoid becoming more digitised and interconnected - manufacturing processes need to do this to enhance efficiency and productivity - but rather to address the fact that manufacturers are becoming more vulnerable to cyberattacks head on with proactivity, knowledge and protection.

How to prepare for cyber incidents

The best way to protect a business in the manufacturing and logistics industry from cyber threats is by firstly understanding their own cyber exposure; it’s not just breaching sensitive data, it’s about ransomware and taking down OT just as much as it is about data breach and crime.
Next, the old adage ‘fail to prepare, prepare to fail’ comes to mind; businesses need to
establish and maintain good cybersecurity hygiene, consisting of initiatives such as:

  • Implementing Multi-Factor Authentication (MFA): By requiring users to provide multiple forms of identification to access systems or data, MFA adds an extra layer of security, reducing the risk of unauthorised access in case passwords are compromised.
  • Backing up your data: Regularly backing up critical data ensures that even if systems are compromised or data is lost due to cyberattacks, businesses can recover their information and continue operations with minimal disruption.
  • Creating an Incident Response Plan (IRP): An IRP outlines procedures and protocols to be followed in the event of a cyber incident, ensuring that businesses can respond effectively and resume operations quickly after an attack.
  • Implementing cybersecurity awareness training: This helps manufacturing organisations educate their employees about potential cyber threats. Whether it be phishing attempts, malware or another threat, if staff know how to recognise and respond to them effectively, the likelihood of successful attacks will be greatly reduced.

Investing in additional layers of protection

While some manufacturers have a laissez faire attitude to their cyber exposure and may believe that their existing risk mitigation strategies are sufficient to protect them against cyber threats, it's important to note that cyber insurance can provide an additional layer of protection and financial support in the event of a cyber incident.
Many cyber insurers will also have a nose for manufacturing challenges and opportunities, will help policyholders with implementing the aforementioned initiatives and will provide additional resources and guidance, such as:

  • Understanding and acknowledging uncertainty to build resilience and excellence in underwriting practices
  • Harnessing the power of data analytics, AI and other technologies to gain insights into risk patterns, identify emerging trends, and enhance decision-making processes
  • Developing a culture of continuous learning and adaptation
  • Segmenting risks based on their unique characteristics, which allows insurers to tailor coverage and pricing strategies effectively. In terms of manufacturing, this might include delays in manufacturing operations, which can create a significant disruption in supply chains, or manufacturing operations that have a high cost of goods, making them attractive targets.

Unfortunately, there’s been a historic lack of proactivity, knowledge and protection from manufacturers that’s allowed criminal gangs to exploit a target rich environment highly susceptible to ransomware and highly dependent on technology. And it’s a risk that’s going nowhere soon. With manufacturing a clear target, now is the time to encourage better cybersecurity hygiene across the industry.

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